Pick n Pay pushes break-even back as core earnings stay weak

Pick n Pay swung back to a profit before tax and capital items in its 2026 financial year, helped mainly by lower funding costs after the previous year’s recapitalisation.

However, profitability at headline earnings level stayed under pressure as the supermarket turnaround continued to weigh on performance.

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The retailer has also pushed out its profitability target by a year, and now expects the Pick n Pay segment to break even at trading profit after lease interest level in FY29 rather than FY28, citing the time needed for turnaround measures to take full effect and tough trading conditions.

The group reported a R597 million swing in profit before tax and capital items to R360 million for the 52 weeks ended 1 March 2026, from a loss of R237 million a year earlier, driven mainly by a R681 million improvement in net funding interest, partly offset by lower trading profit.

The recovery was however weaker at headline earnings level. A R450 million increase in non-controlling interest charges to R535 million, reflecting Boxer’s 34.4% minority stake for the full year after its listing, limited the improvement.

As a result, Pick n Pay’s headline loss narrowed by R22 million to R386 million.

Headline loss per share improved 14.6% to 52.58 cents, while group trading profit declined 4.2% to R1.685 billion. Turnover rose 1% to R120.3 billion, or 3.4% on a comparable 52-week basis.

Growth was driven by Boxer, which posted 12.3% turnover growth on a like-for-like 52-week basis, while the Pick n Pay segment recorded a 1.6% decline due to store closures and conversions.

Read: Boxer boosts dividend as discount model drives growth

Gross profit margin expanded 0.5 percentage points to 18.8%, but higher operating costs, including Boxer’s continued store rollout, weighed on earnings.

On 18 May, Pick n Pay raised R4.7 billion through an accelerated bookbuild of 57.3 million Boxer shares. The sale reduced its stake in Boxer from 65.6% to 53.1%, although it retains majority control.

The proceeds, alongside about R2.4 billion of net cash in the Pick n Pay segment, will fund the retailer’s turnaround and growth strategy.

Turnaround and outlook

FY26 focused on implementing key elements of the recovery plan, including store closures, management changes, product improvements – particularly in fresh categories – and a new logistics contract expected to improve supply chain efficiency and margins. Early signs of progress include stronger like-for-like sales and improved gross margins in South African supermarkets.

Labour costs at Pick n Pay are a significant challenge, the group says. Employee costs account for 41.4% of trading expenses in the Pick n Pay segment and are above peer levels.

After restructuring support office roles, the retailer initiated a Section 189A consultation process with store-based bargaining unit employees to reshape its labour model and align costs and working practices more closely with industry norms.

Looking ahead, Pick n Pay warned that elevated oil and diesel prices linked to conflict in the Persian Gulf have added uncertainty around transport costs, inflation and consumer spending.

Read: Pick n Pay initiates Section 189 process to reset labour cost base